Electric Vehicles In India Could Get Cheaper After GST Tax Cut

Last Updated on July 5, 2022 by Anu Joy

The Government of India has cut the GST rates on lithium-ion batteries in India. It is now down to five percent from the earlier 18 percent. The decision to slash the rates was taken during the 47th meeting of the GST Council held in Chandigarh. The reduction of GST on the batteries is expected to have a positive impact on the EV industry, as batteries cost more than 50 percent of the electric vehicles, and would help to reduce the prices of EV cars. However, electric vehicles will be continued to be charged five percent as before. 

This is the second time that the government has slashed GST rates on EV batteries in India. Back in 2018, it reduced the GST on lithium-ion battery packs from 28 percent to 18 percent in a view to encouraging EV manufacturing. In December 2021, Amitabh Kant, CEO of NITI Aayog hinted that the government was working toward reducing the taxes on EV batteries.

Vehicle manufacturers hailed this move by the Indian government, as it could help to reduce the prices of electric vehicles in India. In an interview with IANS, Akshit Bansal, CEO of EV charging network provider, Statiq, said, “This move will encourage the industry to pass on more cost benefits to the users and also lend a necessary push to people who are still looking for incentives to adapt to the EV way-of-life.”

The GST Council headed by Finance Minister of India, Nirmala Sitharaman, however, did not mention anything about reducing the taxes on hybrid vehicles. Currently, the EV infrastructure doesn’t exist in India and hybrids would be perfect in the current situation. Strong hybrid vehicles like the Honda City e: HEV and the recently unveiled Toyota Hyryder provide an excellent fuel economy of around 25km/l inside the city. The engine and the electric motors work in tandem to provide such fuel efficiency. Moreover, you can plan long drives without the fuss of charging your car, as the engine charges up the batteries.

The reduction of taxes on hybrid cars would have done a world of good, especially since the fuel-efficient diesel-powered engines are on their way out. Hope they take a leaf out of the Haryana government’s book, which recently included hybrid cars in its new EV policy, offering discounts of up to ₹3 lakhs.